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City and County of San Francisco i) Ss FER S Employees’ Retirement System ae Office of the Executive Director RETIREMENT BOARD CALENDAR SHEET Deferred Compensation Committee Meeting of April 27, 2016 To: Deferred Compensation Committee Through: Jay suse ft Caryn Bortnick,/? Executive Director Deputy Executive Director From: Diane Chui Justen| Deferred Compensation Plan Manager Date: April 27, 2016 Agenda Item Recommendation of Semi-Finalists for the Investment Consulting Services RFP. Background Angeles Investment Advisors is the current investment adviser for the SFDCP. The current contract with Angeles will expire on June 30, 2016. Upon Retirement Board approval, Staff issued a Request For Proposal (RFP) on January 22, 2016 to solicit bids for Investment Consulting Services for the City and County of San Francisco Deferred Compensation Plan. The SFDCP received seven (7) bid responses to the RFP from the following firms: Angeles Investment Advisors, LLC ‘Aon Hewitt Callan Associates Inc Cammack Retirement Group NEPC, LLC NEP Retirement ‘Segal Rogerscasey Noy eene Evaluation SFDCP staff partnered with Gay Lynn Bath in the evaluation of RFP responses. For eleven (11) years, Ms. Bath served as the Plan Administrator for the Oregon Savings Growth Plan (OSGP), a 457(b) plan offered by the Public Employees Retirement System (PERS). Prior to that, Gay Lynn was the 401(k) Plan Manager at the Public Employees Retirement System of Idaho (PERSI). Her background in government and deferred compensation (DC) plans made her an ideal resource to help score the RFPs. Her biography is included in the attachments. In review of the RFP responses, Staff and Ms. Bath evaluated the investment consultant capabilities of the seven (7) proposers. While each of the firms met the minimum qualifications, three (3) firms (Callan Associates, NEPC LLC and Segal Rogerscasey) rose to the top based on their responses. Some key considerations were: 1. Deep Government 457(b) experience across the DC industry. Given the relatively few large government 457(b) plans, experience with other 457(b) plans will help the SFDCP stay ahead of the curve. Additionally, being knowledgeable in 457(b) rules and regulations is critical in assisting with plan provision/document changes. 2. Investment Manager Review. Having a diverse menu of managers to choose from is important, as is the methodology in how they are chosen and monitored. An established process and timeline for when a manager underperforms ensures that we are providing the best options for ‘our participants. 3. Customer centric vision. The SFOCP is currently in a position for growth and needs to partner with an investment consultant that can give the plan the dedication it requires. Being able to synthesize information appropriately for its audience is critical, and it needs to be clear and substantiated to be meaningful. ‘As such, Callan Associates, NEPC LLC and Segal Rogerscasey distinguished themselves not only in their ability to meet SFDCP’s current needs, but future needs as well. Below is a brief summary for each of these recommended semi-finalists: Callan Associates 1. Government and DC Experience. * Serving DC plans since 1979 and began serving 457(b) plans in 1986. © 24 DC plans with assets over $2 billion. 2. Client Team. © 2 person team located in San Fran: © Average client ratio: 9:1 * Average experience of 13 years in consulting and 12 years with Callan. 3. Investment Manager Research. * Information is sourced through Callan’s proprietary investment manager questionnaire, which has been refined over 40 years. Proprietary database contains investment managers 0 who manage over 95% of all U.S. tax-exempt assets, specifically 8,502 products, managed by 1,414 firms. Their mutual fund products database includes almost 15,000 funds managed by about 1,300 firms. 4, Communication and Reporting. * Quarterly performance measurement reports to review the Plan and investment options. Optional monthly flash reports include month-end market values and returns compared to the appropriate index or target for each manager, asset class, and the entire fund. © Ona more informal basis, Callan’s specialty consulting groups undertake research that is often identified during the investment consulting process. These are researched, analyzed, and presented back to the client, typically at a Board or Committee meeting. Consultants and specialists routinely visit clients’ offices to provide workshops and other instructional forums personalized specifically to their needs. © Launched in 1980, the Callan Investments Institute was the first forum created specifically to educate investment fiduciaries and is widely recognized as one of the leading educational settings for the pensions and investments industry. Provides clients with context around a complex industry through published research and surveys, as well as educational conferences and workshops conducted nationwide. NEPG, LL 1. Government and DC Experience. ¢ Serving DC plans since 1993 and began serving 457(b) plans in 2001. 21 DC plans with assets over $2 billion. 2. Client Team. * 2 person team, with the lead consultant in Redwood City and the backup consultant in Dallas. © Average client ratio is 6:1 * Average experience of 24 years in consulting and 7 years with NEPC, LLC. 3. Investment Manager Research. * Proprietary database houses their qualitative views on a broad group of investment managers, as well as more in-depth analysis and commentary on NEPC’s Focused Placement List (FPL) and high-exposure investment managers. The database tracks 4,728 top rated products and strategies, and 809 are on their FPL. 4. Communication and Reporting. * Quarterly defined contribution performance reports, monthly performance updates, “48- hour letters” that provided a recommended action within 48-hours of a si announcement from one of our investment managers ‘* Annual fee benchmarking report helps DC clients understand the true cost of their plans and all of the associated revenues that go to the investment managers and service providers. Compares the weighted-asset investment expense (in dollar terms and basis points) to peers and universe, how revenue sharing is used and how both relate to plans of similar size © Quarterly regulatory updates and client webinars on topics including fiduciary responsibilities. Education modules on auto features, brokerage windows, target date fund due diligence and income solutions, as well as monthly and quarterly newsletters. Ad-hoc